Tax cuts may be stalled in the Senate

The World Today - Wednesday, 11 May , 2005 12:18:00

Reporter: Louise Yaxley

ELEANOR HALL: But first to the continuing politicking in Canberra.

While the Treasurer's Budget will have a smooth run through the Senate after the first of July this year, the Democrats and the Labor Party could use their last moment of control in the Upper House to delay last night's promised tax cuts.

The Treasurer announced that the cut in the bottom tax rate from 17 cents in the dollar to 15 cents, and the increased thresholds for higher rates would start on the 1st of July this year. But that can only happen if the legislation passes the Senate before then.

The Prime Minister has already taunted the Opposition about voting against the tax cuts. But as it stands the "tax cuts for all" in last night's Budget may not happen quite as soon as the Government proposed.

In Canberra, Louise Yaxley reports.

LOUISE YAXLEY: Tax cuts are the big surprise, and the big political weapon in this Budget. The Government has cut taxes for everyone. And in doing so, avoided the problem it created last year by excluding those on less than $52,000 a year. But it is still facing criticisms that these tax cuts favour the rich.

KIM BEAZLEY: I'm mean, it's not fair on middle Australia as it stands at the moment, where people on average weekly earnings get a $6 a week tax cut, and the upper income folk get ten times that amount.

JOHN HOWARD: People earning higher incomes, pay a lot more tax. And they will pay a lot more tax after these changes, because we have a progressive tax system. People earning high incomes do not get family tax benefits.

LOUISE YAXLEY: The Prime Minister has a second political ace up his sleeve with these tax cuts – he can use them to exploit the differences within the Labor Party.

JOHN HOWARD: I don't normally quote the National Secretary of the Australian Workers Union but I will on this occasion. Bill Shorten, who's regarded as a future Labor luminary incidentally – perhaps that's why his philosophy on these things is different from that of Mr Beazley and Mr Swan – in an article in the Australian on the 3rd of May, he said the top marginal income tax rate threshold should be raised to create a fair, productive and competitive tax system.

He said he knew steelworkers who stopped working overtime because they were pushed into the 47 per cent tax bracket which came in at too low a level of income.

Now, can I simply say Bill Shorten has said it all and in many respects, the changes to those thresholds are a response to the needs of Bill Shorten's steelworkers. They're not a bonanza for the rich. They recognise the reality of hardworking, aspirational Australia.

LOUISE YAXLEY: Peter Costello announced these tax cuts would come into effect on the first of July. So any legislation would have to be passed before the Government wins control of the Senate in its own right. And at the moment, that doesn't look likely.

JOHN HOWARD: I'd like to know where Mr Beazley stands on tax cuts.

KIM BEAZLEY: We're going to vote against it.

LOUISE YAXLEY: While the Budget returns dollars to taxpayers, it's regarded warily by people on welfare.

Those on disability pensions now won't be affected, but from July next year, people applying for that benefit would only get it if they are incapable of working more than 15 hours a week. That's twice as tough as the current work test.

And from next year single parents will have to look for part time work when their youngest child turns six.

Kim Beazley says that's too tough.

KIM BEAZLEY: I think it's dreadful when you look at what's happening to the penalties on very low income families supporting children, and on women supporting children on their own, to see the way they carry a cut of those who come on from this point on, carry a cut – it's about the same size as the very wealthy get in a taxation cut.

LOUISE YAXLEY: The Council of Social Services says these rules put welfare recipients in danger of losing money and slipping into poverty.

Liberal back bencher Wilson Tuckey disputes that.

WILSON TUCKEY: I don't know what ACOSS is on about – it's giving people, or adding to their opportunity to be in the workforce. They may have some disability but the reality is that years ago, they wouldn't have got in the workforce if you were able.

LOUISE YAXLEY: And Peter Costello's Budget has won him plenty of cheers from Liberals like Warren Entsch and Peter Lindsay.

WARREN ENTSCH: And we got far better than I expected. I mean, the tax cuts that we have now – one of the concerns I had that a lot of our brightest always went overseas because they were so penalised with our tax system – I think this is going to certainly encourage a lot of those people to stay here.

PETER LINDSAY: The Budget for Australia last night was probably the best Budget I've ever seen in 10 years.

LOUISE YAXLEY: But that enthusiasm for Mr Costello's work as Treasurer doesn't necessarily translate into support for him becoming Prime Minister – his next aim.

And the question of when Mr Howard will say goodbye as Prime Minister, leaving the way open for Mr Costello, still comes up at every interview, including this one with Southern Cross Radio's Neil Mitchell, where goodbye was a bit confusing.

JOHN HOWARD: I think he's been a wonderful Treasurer. Goodbye – terrific.